In the long-running saga of Intel’s conflicts with various national trade commissions, 2009 was a lousy year for Intel. The European Commission fined Intel for nearly 1.5 billion USD, the US Federal Trade Commission sued Intel on anti-trust grounds, and Intel settled with AMD for another 1.25 billion USD. If nothing else it was an expensive year, and while Intel settling with AMD was a significant milestone for the company it was not the end of their troubles.

Now just shy of 9 months after the FTC’s lawsuit began, Intel’s conflicts are starting to come to an end. While the European Commission’s fine is still on appeal, Intel can close the book on their troubles with the FTC: Intel and the FTC have reached a settlement ahead of what would have been next month’s court hearing. With this settlement the FTC is agreeing to drop the case in return for a series of prohibitions and requirements placed upon Intel to maintain and enhance the competitive environment in the CPU and GPU markets. However true to their word, the FTC did not push for any fines – this is a settlement of actions, and not one of greenbacks.

Background

As a quick refresher, the FTC had been investigating Intel for a number of years. Ahead of their suit in December of 2009 the FTC brought Intel to the table and tried to negotiate a settlement, but that didn’t come to pass. In the meantime Intel and AMD reached a separate truce back in November of 2009, an important distinction as AMD had been the primary instigator of all of the investigations against Intel. Ultimately the FTC decided to take their case forward without further help from AMD, a somewhat surprising move that at first glance seems to have largely panned out in the FTC’s favor.

In the suit, the FTC listed a number of complaints towards Intel over both the CPU and the GPU markets, where in the former Intel is the dominant player, and in the latter their market share has been increasing over the years as IGPs grow in popularity. The FTC’s complaints were roughly as follows:

CPU

The usual complaints we’ve seen from the EU. Intel rewarded OEMs to not use AMD’s processors through various means, such as volume discounts, withholding advertising & R&D money, and threatening OEMs with a low-priority during CPU shortages.

Intel reworked their compiler to put AMD CPUs at a disadvantage. For a time Intel’s compiler would not enable SSE/SSE2 codepaths on non-Intel CPUs, our assumption is that this is the specific complaint. To our knowledge this has been resolved for quite some time now.

Intel paid/coerced software and hardware vendors to not support or to limit their support for AMD CPUs. This includes having vendors label their wares as Intel compatible, but not AMD compatible.

False advertising. This includes hiding the compiler changes from developers, misrepresenting benchmark results (such as BAPCo Sysmark) that changed due to those compiler changes, and general misrepresentation of benchmarks as being “real world” when they are not.

The GeForce 9400M: Intel's chief competitor in the Core 2 integrated graphics market and a threatened product line

GPU

Intel eliminated the future threat of NVIDIA’s chipset business by refusing to license the latest version of the DMI bus (the bus that connects the Northbridge to the Southbridge) and the QPI bus (the bus that connects Nehalem processors to the X58 Northbridge) to NVIDIA, which prevents them from offering a chipset for Nehalem-generation CPUs.

Intel “created several interoperability problems” with discrete CPUs, specifically to attack GPGPU functionality. We’re actually not sure what this means, it may be a complaint based on the fact that Lynnfield only offers single PCIe x16 connection coming from the CPU, which wouldn’t be enough to fully feed two high-end GPUs.

Intel has attempted to harm GPGPU functionality by developing Larrabee. This includes lying about the state of Larrabee hardware and software, and making disparaging remarks about non-Intel development tools.

In bundling CPUs with IGP chipsets, Intel is selling them at below-cost to drive out competition. Given Intel’s margins, we find this one questionable. Below-cost would have to be extremely cheap.

Intel priced Atom CPUs higher if they were not used with an Intel IGP chipset.

All of this has enhanced Intel’s CPU monopoly.

The purpose of the suit and what would have been the associated trial would have been for the FTC to prove that Intel engaged in these actions, and more importantly that these actions were harmful to the market to a significant enough degree to run afoul of Section 5 of the FTC Act.

One other piece of more recent background information involves Dell. Dell has been under investigation by the US Securities & Exchange Commission for the past few years regarding financial irregularities. Those irregularities, as the SEC charges, were due to Intel’s secret rebates to the OEM to not use AMD processors. When Dell began using AMD processors in 2007 and those rebates stopped, Dell ceased to turn a profit.

In turn, since these payments were secret, investors had no idea that the only reason the company was profitable was due to these payments as opposed to entirely above-the-board measures by the company. The end result was that the SEC sued Dell, and last month Dell settled the case by paying a $100 million fine to the SEC. As is the case with similar settlements, the case is not legally binding proof of Intel’s actions, as Dell neither had to confirm nor deny the SEC’s charges (in essence allowing them to claim that the settlement is just the easiest way to get the SEC out of the way). It does however show us just how large Intel’s rebates to OEMs may have been.

The Settlement

The resulting settlement is, in the FTC’s words, “not punitive but rather remedial.” Going in to the suit the FTC was not asking for a fine or some other method of punishing Intel, and nothing like this is in the final settlement either. Everything in the settlement is geared towards undoing the damages from Intel’s past actions and/or preventing future damages by disallowing Intel from engaging in specific anti-competitive actions. Ultimately the only money that this will cost Intel is $10 million for a reimbursement fund to pay misled buyers of Intel’s compilers and libraries, and another $2 million to pay for Technical Consultants to evaluate Intel’s compliance over the next 10 years.

Overall the FTC got the vast majority of the terms they were requesting when they filed the suit back in December. However they did not get everything, and we’ll be touching on what they didn’t get.

The settlement covers several areas of Intel’s business: CPUs, Chipsets & GPUs, and Compilers & Claimed performance. The following are the settlement terms, roughly grouped by what business they impact:

CPUs

The first and most important requirement being placed on Intel is that they are barred from engaging in any further rebate schemes or punishment schemes to discourage OEMs from using AMD processors. This means that Intel cannot offer any kind of benefit or rebate to an OEM based on the percentage of Intel processors they use, and at the same time they cannot punish an OEM by taking away marketing dollars or limiting their chip supply if they do use AMD or Via processors. There is an exception to this however: this does not impact most volume discounts. Intel is still free to offer volume discounts so long as they don’t end up selling CPUs below cost. Furthermore Intel is free to break the above terms and offer benefits to OEMs if they reasonably believe that AMD is already doing the same thing – this effectively keeps AMD from abusing rebates and payments in a manner similar to what Intel was accused of, by allowing Intel to resume those rebates if AMD does.

The biggest benefactor of rebates, Dell?

The second requirement is very similar to AMD’s settlement with Intel last year which paved the way for AMD to spin-off its fabs in to Global Foundries and then in turn outsource the fabrication of their CPUs to GF. Intel is required to let all of its x86 licensees outsource their x86 CPU fabrication to a third party fab. As Intel’s agreement with AMD already allowed AMD to do this, this requirement effectively means that Intel also allows Via to do this.

The third CPU requirement is a bit more interesting. It’s well known that Intel’s x86 cross-licensing agreements with AMD and Via place strict requirements on what these companies can do while still maintaining their x86 licenses, largely to keep these companies from selling off their license or sub-licensing other companies to design x86 CPUs. Or to put this another way, Intel’s x86 license agreement is designed to keep AMD and Via as the only other x86 CPU designers and to prevent anyone else from becoming an x86 CPU designer by buying the license or the company.

The FTC has not gone so far as to require that Intel drops these provisions, but it does weaken them. If either AMD or Via has a “change of control” (i.e. a buyout/takeover/merger/joint-venture), Intel cannot immediately take the resulting company to court to terminate the license. Intel is required to enter in to good-faith negotiations with the new company to continue x86 CPU design and can only begin court proceedings after a certain period of time. As far as we can tell this does not require that Intel extend a license to a buyer of AMD or Via, but it does require that they consider it. If Intel does not act in good-faith in these negotiations, then the FTC can sanction Intel over it.

The Foundry Dilemma: A problem no more. x86 CPU fabrication can be outsourced

The big question of course is whether this will lead anywhere. x86 CPU development is a uniquely expensive and time-consuming endeavor – just because AMD or Via could work with another company doesn’t mean there’s anyone else out there that wants to. NVIDIA has long been considered a candidate for entering the x86 market, but as far as we can tell these terms are to protect the x86 market as a whole, and are not just there to allow NVIDIA to enter the market.

The final requirement of the settlement specifically pertains to Via. Via’s x86 license was scheduled to lapse in 2013 – Intel is required to offer a 5 year extension to Via. Note that this doesn’t compel Via to take the extension or under what terms Intel must offer it, but ultimately Via must be given the option to extend their x86 license to 2018.

Chipsets & GPUs

The next group of requirements relate to Intel’s chipset and GPU businesses, and also how they interact with competing chipset and GPU manufacturers. Thus these terms largely dictate how the company interacts with NVIDIA and AMD’s GPU business.

The first requirement is that Intel must continue to support PCIe on all of its CPUs/chipsets for the next six years. Ultimately this is to prevent Intel from releasing CPUs that can’t be used with a third party GPU, although technically speaking this can apply to any peripheral that uses PCIe. Notably this only applies to PCs, which automatically excludes any device with a screen smaller than 7”. This means that Intel’s SoC platforms such as Moorestown are not required to include PCIe connectivity (which would hamper the platform’s energy saving abilities) while netbook platforms such as Pine Trail are required to include PCIe connectivity. Similarly, designs over 7” such as tablets are not automatically defined as PCs, but this is where the FTC’s definition gets murky.

It’s worth noting that while this requirement means that Intel has to support PCIe, it does not specify a revision or the required number of lanes. Intel is free to choose PCIe 2.1, 3.0, 4.0 (if there ever is such a thing), etc., and we don’t expect that this will change Intel’s plans to move to newer versions of PCIe in the future. Meanwhile in lieu of lane requirements, there’s a second, more general requirement towards limiting the performance of the PCIe bus.

The second requirement is that Intel is not allowed to engage in any actions that limit the performance of the PCIe bus on the CPUs and chipsets, which would be a backdoor method of crippling AMD or NVIDIA’s GPUs’ performance. At first glance this would seem to require them to maintain status quo: x16 for GPUs on mainstream processors, and x1 for GPUs on Atom (much to the chagrin of NVIDIA no doubt). However Intel would be free to increase the number of available lanes on Atom if it suits their needs, and there’s also a clause for reducing PCIe performance. If Intel has a valid technological reason for a design change that reduces GPU performance and can prove in a real-world manner that this change benefits the performance of their CPUs, then they can go ahead with the design change. So while Intel is initially ordered to maintain the PCIe bus, they ultimately can make changes that hurt PCIe performance if it improves CPU performance.

PCI Express: Intel is required to support it for six more years

Finally, six years is a not a number that’s set in stone. If the industry moves away from PCIe sooner than this, then the FTC can cancel this requirement early at their discretion.

Ultimately the fact that this is a six year (or shorter) requirement is quite interesting in the face of the fact that most of the other requirements are for five or ten year periods. Since the FTC has the power to cancel this requirement at any time, why didn’t they go with a full ten years? With the oncoming merger of the GPU and the CPU in Intel’s Sandy Bridge and AMD’s Bulldozer, it’s not a stretch to question whether the PCIe bus has more than six years’ life left in it as a CPU-GPU interconnect. The way this requirement was structured would seem to indicate that it was NVIDIA and AMD driving it, in which case we’re left wondering what the two GPU juggernauts have planned for 2016 and beyond.

Finally for chipset & GPU requirements, the FTC is requiring that Intel accurately represent its roadmap. One of the FTC’s charges was that Intel mispresented its roadmap to NVIDIA which in turn lead to the spat between NVIDIA and Intel over chipsets, buses, and licensing rights, so this would forbid Intel from offering false roadmaps in the future. Since the terms of this settlement don’t involve the renegotiation/reinstatement of NVIDIA’s chipset license for DMI and QPI however, we’re not sure where this is going to lead beyond clarification over what version of PCIe future Intel chipsets/CPUs will support.

Compilers & Claimed Performance

The final group of requirements revolve around Intel’s compiler, libraries, and any performance claims made about their products which involve those compilers.

As we mentioned previously, Intel was accused of sabotaging their compiler to use suboptimal code paths for non-Intel CPUs, such as by using an x87 code path instead of an SSE2 codepath on an Athlon 64 processor. As far as we know this practice ended some time ago, but we’re still trying to get a more conclusive answer here. In any case there are a few different requirements related to this.

The first requirement is that Intel needs to disclose when their compiler is favoring their CPUs over AMD or Via’s CPUs. Notably this doesn’t require that they treat other CPUs equally (such as by picking code paths based on CPU feature flags), only that if they discriminate based on the CPU that they disclose this discrimination.

This leads in to the $10 million reimbursement program that Intel is being required to offer. This fund will be used to cover the costs encountered by mislead customers who choose to move their software to a non-Intel compiler and/or library. Since Intel now has to disclose any Intel-only optimizations in their compilers, this only applies to existing customers who used Intel’s compilers ahead of Intel’s compiler disclosure.

The rest of the requirements relate to Intel’s advertising of their compiler’s performance, and the performance of their products when using those compilers. Intel is not allowed to claim their compiler is faster on AMD/Via CPUs when this is not the case. Finally Intel will be required to disclose that benchmarks may not provide an accurate performance comparison between their processors and AMD/Via’s processors whenever they are making a performance claim involving benchmarks. Or to put this another way, it’s a Your Mileage May Vary clause for CPU advertisements.

What the FTC Didn’t Get

Going in to this suit, the FTC asked for a number of things, and while they got many of those things in the settlement they didn’t get all of them. The following is our list of things the FTC asked for from our earlier article, and whether they got that item under the terms of the settlement or not.

FTC/Intel Lawsuit Requested Remedies

Request

Result

For Intel to be barred from paying OEMs to not use AMD processors

Intel is barred from offering rebates, kickbacks and some forms of volume discounts

For Intel to be barred from threatening OEMs in to not using AMD processors

Intel is barred from witholding advertising money, technical support, or chips from OEMs using AMD CPUs

For Intel to be barred from selling products below cost

Intel is not allowed to sell CPUs or chipsets below the product cost

For Intel to be barred from designing or selling products that inhibit 3rd party GPU performance

Intel is not allowed to make design choices that reduce GPU performance unless they can prove doing so improves CPU performance

For Intel to make reparations to customers who used their compiler not knowing that it may discriminate against non-Intel CPUs

Intel is required to set up a $10 million fund to pay for customers who were mislead and wish to switch to another compiler

For Intel to to be barred from making misleading statements about their compiler and its performance

Intel is required to disclose that their compiler may discriminate against non-Intel CPUs, and is not allowed to claim that their compiler is faster for non-Intel CPUs when it is not

For Intel to license the QPI and DMI buses to third party chipset manufacturers.

The FTC did not get this; Intel is under no obligation to license QPI or DMI

For Intel to allow AMD and Via to outsource their x86 CPU fabrication to third party fabs

Intel is required to allow AMD and Via to outsource their x86 CPU production to third party fabs so long as those fabs uphold certain IP protection requirements

For Intel to stop badmouthing competing products unless they have solid scientific evidence (primarily in the GPU space)

Compilers: YesGPUs: No

For Intel to pay for the independent organization (Technical Consultants) that will monitor their compliance

Intel is required to pay up to $2 million over 10 years for the Technical Consultants to monitor their compliance

The FTC got the vast majority of what they requested. Intel is barred from engaging in a number of anti-competitive practices, including benefits for OEMs to only use Intel CPUs, punishments for OEMs using non-Intel CPUs, from designing products to reduce GPU performance, from outright denying the transfer of an x86 license should a current holder be purchased, and from making misleading statements about their compiler.

In fact there’s really only two things on the FTC’s list that they didn’t get: they didn’t get chipset licenses, and they didn’t get stronger protections for AMD and NVIDIA’s GPU divisions. It’s probably not a coincidence that both of these issues were primarily of importance for NVIDIA, as AMD does not make Intel chipsets and AMD is not currently locking horns with Intel over high performance computing using GPUs. For as much as the FTC got out of this settlement, it’s interesting that they did not get these last two items. It may very well be that NVIDIA has truly given up on making a DMI/QPI chipset, in which case the chipset requests would be rendered moot. But NVIDIA has claimed loudly to the FTC that Intel is hurting their business by making false claims about CPU and Larrabee performance versus GPGPU performance, and there’s nothing in this settlement about that.

It’s worth noting that NVIDIA did not release an official response to this settlement even though it has directly impacted them. There are a number of ways to interpret this, but the most likely interpretation is that the two companies are going to continue butting heads unabated. AMD and Intel may have peace, but right now it’s a safe bet that NVIDIA and Intel do not.

Final Thoughts

Wrapping things up, we’ve looked at what the FTC’s complaints were, what they asked for, and what they’re getting out of this settlement. What remains however is probably the most important question for computer buyers reading this article: how will it impact you?

The short answer is that it won’t. Computers won’t become cheaper, new Intel-compatible chipsets won’t be introduced, the forthcoming fusion of the CPU won’t be changing schedule, etc. In reality most of the things Intel is being barred from doing are things that they discontinued doing long ago if they did them at all (note that this settlement is not an admission of guilt on Intel’s part). The FTC calls these measures corrective, but outside of the compiler requirements these measures would better be described as preventative. This settlement is structured as a list of things Intel can and can’t do, and almost all of the measures are things they already have or have not been doing.

The most unexpected measure to come out of this settlement is without a doubt the “change of control” requirements. This opens the door to another company taking over one of the two non-Intel x86 licenses from either AMD or Via by buying them out, but this is by no means a given. It’s something worth keeping an eye on for now, but it doesn’t appear to be something that is going to be acted upon any time soon.

The biggest impact from this settlement will be what does not happen, and that’s a repeat of the Athlon 64/Pentium 4 situation in 2003, with Intel using their marketing muscle and underhanded tactics to limit AMD’s progress at a time where they offered a superior CPU. Now that Intel has already been through this process and the FTC will be regularly monitoring their compliance, any kind of underhanded tactics against AMD would quickly get them in trouble with the FTC with little recourse to get out of it. In spite of the corrective nature of the settlement it probably doesn’t go far enough to completely undo the damage that AMD suffered if all of the FTC’s claims are true, but between this settlement and the private AMD settlement quite a lot of requirements have been hoisted onto Intel.

Ultimately, is this enough to prevent anti-competitive abuse in the future? The most optimistic response is that hopefully we never find out the answer to that.